Apathy in society

I read an interesting article in Economic Times today about problems with banks recovering payment from loan defaulters.

Recently there has been a spate of incidents where banks have used horrible means to try to recover money from loan defaulters. They have sent goondas and musclemen to the customer’s house, threatened them, and even in one case went to their kid’s school to threaten. In a couple of extreme cases, two people couldn’t take the harassment anymore and committed suicide. Few people filed lawsuits and one of them went to the Supreme Court. The court took a very strict view against the banks and they ruled that its illegal for banks to use force or aggression to try to recover their loans. They also instructed police to arrest the CEO of any bank/company that indulges in such behavior. Following this apparently banks have tried to be more careful.

But see where the apathy in society has led to now: apparently now there is an increasing trend that people have started threating banks that if they ask to repay the loan they will commit suicide or file a case that they are being harassed! This newspaper article talked about a major bank CEO getting a letter from a borrower threating that he will commit suicide and site the CEO as the reason. Jeez… The court tries to do the right thing by the people and the greed in our society exploits that to its gain. What is the bank supposed to do now? They are now in a tight spot, no doubt.

This is akin to many of the rural folks now beginning to “expect” subsidies and loan writeoffs. Few times the government bails out farmers and poor people in the villages by writing off their bank loans. Now I heard that many of these people are deliberately getting loans with an idea to never repay, expecting the govt to subsidize their greed. This just means bad debt (aka “loss”) to the banks. Many banks have now become very reluctant to lend to these guys. Can’t blame them… Problem with our society is that people have no sense of self-discipline or integrity.

One way to solve this problem for banks is to introduce a credit scoring/rating system and consequences for a low credit score. The US has had such a system in place and personally I really like the fact that you are made responsible for your financial actions or inactions. I am glad to see that the Indian govt is thinking about doing a similar thing through CRISIL and has even called for RFPs. The biggest problem I see in doing this is that there is no unique way to identify everyone. There is no social security number concept. The PAN card is one idea in that direction, but thats only for tax payers/filers (and there are enough people who have built an illegal “collection” of PAN cards for themselves) at the moment. What we can do is extend the PAN card to everyone – give one to every child being born from now on. The challenge is to do this across one billion people, a majority of them in villages where the concept of using a card will take time to reach. But we have to start at some point… It might take a generation to reach and teach everyone, but we will get there. Didn’t we give voter ID cards to mostly everyone with a reasonable amount of success? Since it has far more penetration than the PAN card, maybe we can extend its use as a national ID card/number for all financial, political and other transactions.

A pre-requisite for becoming a developed country is a uniform way to identifying and tracking people and their transactions, not for being a big brother but for compliance.